What is the abbreviation for federal unemployment tax and its maximum percentage?

The federal unemployment tax is abbreviated as FUTA, which stands for Federal Unemployment Tax Act. The correct maximum percentage for this tax is 6.0%. This tax applies to employers and is used to fund unemployment benefits for workers who have lost their jobs through no fault of their own. The funds collected through FUTA help to provide benefits during periods of unemployment and are crucial for the overall economic stability of the workforce.

While the standard rate is 6.0%, it’s important to note that employers can receive a credit of up to 5.4% against this tax if they pay their state unemployment taxes in full and on time, potentially reducing their effective FUTA rate to as low as 0.6%. Understanding both the abbreviation and the maximum percentage is vital for those working in payroll and human resources to ensure compliance with federal regulations.